More care homes at risk of failure, report warns

The percentage of care homes at risk of going bust has risen to 16% over the last 12 months, a new report warns.

Accountancy firm Moore Stephens found 12% of care homes were at risk of failure in its previous report published last year (see Many care homes face going bust).

Lee Causer, Restructuring Partner, said: “Too many businesses in the care home sector are heading back to the brink.

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“The mixture of rising costs, cuts in funding and an aging population has created a volatile situation, with many companies now showing signs of significant financial stress.

“Due to the aging population, extra staff are needed at care homes in order to keep up with the demand, but many care homes just don’t have the budget for extra staff.

“This has made it increasingly difficult for care home companies to offer a high standard of care whilst remaining solvent.

“Concerns have also been raised that private care home providers unable to make a profit will hand back contracts to local authorities.

“It’s critical that care home companies receive the funding they require in order to offer the highest standard of care possible.

“Commentators have also speculated that the debate over the post-Brexit free market of labour has already reduced the number of EU staff willing to relocate to the UK to work in the sector.”

Moore Stephens said the increase in the National Living Wage had placed a significant burden on care home profit margins.

The report also highlights the growing use of agency staff due to difficulties in recruiting and retaining staff.

According to NatWest’s Care Home Benchmarking report, care home staff costs have reached an all-time high of 55% of turnover due to the increased reliance on agency workers.

The report also highlights a lack of local authority funding. Local authorities in England plan to make £824m of savings in their social care budgets in 2017/18, according to the Associate Directors of Adult Social Services, despite an extra £2bn over the next three years in social care funding being promised by the Chancellor in the March budget.